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Factbox: Fed staff forecasts from FOMC minutes

The following are the Federal Reserve's staff forecasts as contained in the minutes of recent Federal Open Market Committee meetings:

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MARCH 18-19 FOMC: Minutes released on April 9:

In the economic forecast prepared by the staff for the March FOMC meeting, real GDP growth in the first half of this year was somewhat lower than in the projection for the January meeting. The available readings on consumer spending, residential construction, and business investment pointed to less spending growth in the first quarter than the staff had previously expected. The staff's assessment was that the unusually severe winter weather could account for some, but not all, of the recent unanticipated weakness in economic activity, and the staff lowered its projection for near-term output growth. Largely because of the combination of recent downward surprises in the unemployment rate and weaker-than-expected real GDP growth, the staff lowered slightly the assumed pace of potential output growth in recent years and over the projection period. As a result, the staff's medium-term forecast for real GDP growth also was revised down slightly. Nevertheless, the staff continued to project that real GDP would expand at a faster pace over the next few years than it did last year, and that real GDP growth would exceed the growth rate of potential output. The faster pace of real GDP growth was expected to be supported by an easing in the restraint from changes in fiscal policy, increases in consumer and business confidence, further improvements in credit availability and financial conditions, and a pickup in the rate of foreign economic growth. The expansion in economic activity was anticipated to lead to a slow reduction in resource slack over the projection period, and the unemployment rate was expected to decline gradually to the staff's estimate of its longer-run natural rate.

"The staff's forecast for inflation was basically unchanged from the projection prepared for the previous FOMC meeting. The staff continued to forecast that inflation would stay below the Committee's longer-run objective of 2 percent over the next few years. Inflation was projected to rise gradually toward the Committee's objective, as longer-run inflation expectations were assumed to remain stable, changes in commodity and import prices were expected to be subdued, and slack in labor and product markets was anticipated to diminish slowly.

"The staff's economic projections for the March meeting were quite similar to its forecasts presented at the December meeting when the FOMC last prepared a Summary of Economic Projections (SEP). The staff's March projections for both real GDP growth and the unemployment rate over the next few years were just slightly lower than in its December forecasts, while the inflation projection was essentially unchanged.

"The staff viewed the extent of uncertainty around its March projections for real GDP growth and the unemployment rate as roughly in line with the average of the past 20 years. Nonetheless, the risks to the forecast for real GDP growth were viewed as tilted a little to the downside, especially because the economy was not well positioned to withstand adverse shocks while the target for the federal funds rate was at its effective lower bound. At the same time, the staff viewed the risks around its outlook for the unemployment rate and for inflation as roughly balanced."

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JAN 28-29 FOMC: Minutes released on February 19:

"In the economic projection prepared by the staff for the January FOMC meeting, growth of real gross domestic product (GDP) in the second half of 2013 was estimated to have been stronger than the staff had expected, though some of the strength in inventory investment and net exports was possibly transitory. The staff's medium-term forecast for real GDP growth was little revised, on balance, as the momentum implied by faster GDP growth in the second half of 2013 was largely offset by a higher projected path for the foreign exchange value of the dollar. In addition, the staff revised downward its view of the pace at which potential output had increased over recent years and would increase this year and next. The staff continued to project that real GDP would expand more quickly over the next few years than in 2013 and that real GDP would rise faster than potential output. This acceleration in economic activity was expected to be supported by still-accommodative monetary policy and an easing in the effects of fiscal policy restraint on economic growth, as well as by increases in consumer and business confidence, further improvements in credit availability and financial conditions, and continued gains in foreign economic growth. The expansion in economic activity was anticipated to lead to a slow reduction in resource slack over the projection period, and the unemployment rate was expected to decline gradually, reaching the staff's estimate of its longer-run natural rate in 2016.

"The staff's forecast for inflation was little changed from the projection prepared for the previous FOMC meeting, although the near-term forecast was revised down a little to reflect recent declines in energy prices. The staff continued to forecast that inflation would run well below the Committee's 2 percent objective early this year but above the low level observed over much of 2013. Over the medium term, with longer-run inflation expectations assumed to remain stable, changes in commodity and import prices expected to be muted, and slack in labor and product markets receding gradually, inflation was projected to move back slowly toward the Committee's objective.

"In considering recent events in emerging market economies, the staff judged that the effects of recent financial market volatility had not been large enough to have a material effect on the overall outlook for those economies and, similarly, that the spillover effects on the United States of developments to date were likely to be modest. Because conditions were in flux, however, these markets would require careful monitoring.

"The staff continued to see a number of risks around its outlook. The downside risks to the forecast for real GDP growth were thought to have diminished, but the risks were still seen as tilted a little to the downside because, with the target federal funds rate at its effective lower bound, the economy was not well positioned to withstand future adverse shocks. At the same time, the staff viewed the risks around its outlook for the unemployment rate and for inflation as roughly balanced."

DEC. 17-18 FOMC: Minutes released on January 8:

"In the economic projection prepared by the staff for the December FOMC meeting, the forecast for growth in real gross domestic product (GDP) in the second half of this year was revised up a little from the one prepared for the previous meeting, as the recent information on private domestic final demand-particularly consumer spending-was somewhat better, on balance, than the staff had anticipated. The staff's medium term forecast for real GDP growth was also revised up slightly, reflecting a small reduction in fiscal restraint from the recent federal budget agreement, which the staff assumed would be enacted; a lower anticipated trajectory for longer-term interest rates; and higher paths for equity values and home prices. Those factors, in total, more than offset a higher path for the foreign exchange value of the dollar. The staff continued to project that real GDP would expand more quickly over the next few years than it has this year and would rise significantly faster than the growth rate of potential output. This acceleration in economic activity was expected to be supported by an easing in the effects of fiscal policy restraint on economic growth, increases in consumer and business sentiment, continued improvements in credit availability and financial conditions, a further easing of the economic stresses in Europe, and still-accommodative monetary policy. The expansion in economic activity was anticipated to slowly reduce resource slack over the projection period, and the unemployment rate was expected to decline gradually to the staff's estimate of its longer-run natural rate.

"The staff's forecast for inflation was quite similar to the projection prepared for the previous FOMC meeting. The near-term forecast for inflation was revised down slightly to reflect some recent softer-than-expected data. The staff continued to forecast that inflation would be modest, on net, through early next year but higher than its low level in the first half of this year. The staff's projection for inflation over the medium term was essentially unchanged. With longer-run inflation expectations assumed to remain stable, changes in commodity and import prices expected to be measured, and slack in labor and product markets persisting over most of the projection period, inflation was projected to be subdued through 2016.

"The staff viewed the uncertainty around the projection for economic activity as similar to its average over the past 20 years. Nonetheless, the risks to the forecast for real GDP growth were viewed as tilted to the downside, reflecting concerns that the extent of supply-side damage to the economy since the recession could prove greater than assumed; that the tightening in mortgage rates since last spring could exert greater restraint on the housing recovery than had been projected; that economic and financial stresses in emerging market economies and the euro area could intensify; and that, with the target federal funds rate already near its lower bound, the U.S. economy was not well positioned to weather future adverse shocks. However, the staff viewed the risks around the projection for the unemployment rate as roughly balanced, with the risk of a higher unemployment rate resulting from adverse developments roughly countered by the possibility that the unemployment rate could continue to fall more than expected, as it had in recent years. The staff did not see the uncertainty around its outlook for inflation as unusually high, and the risks to that outlook were viewed as broadly balanced."

OCT. 29-30 FOMC: Minutes released on November 20:

"In the economic projection prepared by the staff for the October FOMC meeting, the forecast for growth in real gross domestic product (GDP) in the near term was revised down somewhat from the one prepared for the previous meeting, primarily reflecting the effects of the federal government shutdown and some data on consumer spending that were softer than anticipated. In contrast, the staff's medium- term forecast for real GDP was revised up slightly, mostly reflecting lower projected paths for the foreign exchange value of the dollar and longer-term interest rates, along with somewhat higher projected paths for equity prices and home values. The staff anticipated that the pace of expansion in real GDP this year would be about the same as the growth rate of potential output but continued to project that real GDP would accelerate in 2014 and 2015, supported by an easing in the effects of fiscal policy restraint on economic growth, increases in consumer and business sentiment, further improvements in credit availability and financial conditions, and accommodative monetary policy. Real GDP growth was projected to begin to slow a little in 2016 but to remain above potential output growth. The expansion in economic activity was anticipated to slowly reduce resource slack over the projection period, and the unemployment rate was expected to decline gradually.

"The staff's forecast for inflation was little changed from the projection prepared for the previous FOMC meeting. The staff continued to expect that inflation would be modest in the second half of this year, but higher than its level in the first half. Over the medium term, with longer-run inflation expectations assumed to remain stable, changes in commodity and import prices expected to be relatively small, and slack in labor and product markets persisting over most of the projection period, inflation was projected to run somewhat below the FOMC's longer-run inflation objective of 2 percent through 2016.

"The staff continued to see a number of risks around the forecast. The downside risks to economic activity included the uncertain effects and future course of fiscal policy, concerns about the outlook for consumer spending growth, and the potential effects on residential construction of the increase in mortgage rates since the spring. With regard to inflation, the staff saw risks both to the downside, that the low rates of core consumer price inflation posted earlier this year could be more persistent than anticipated, and to the upside, that unanticipated increases in energy or other commodity prices could emerge."